Prop. 13 Still Left's Bogeyman

MAY 9, 2011

California has become such a basket case that outsiders are starting to parachute in and report on the tales of woe from our deficit-racked, economically stagnant and politically dysfunctional state. It makes for good reading for a broader audience, and the reporters can enjoy themselves at the beach or at the mountains while they wag their finger at us foolish Californians.

Unfortunately, these critiques usually end up regurgitating conventional liberal wisdom, which certainly was the case in a ballyhooed recent story in the Economist.

The British publication’s cover story on California, “Where it all went wrong,” pins the state’s woes on direct democracy and on one initiative in particular – 1978’s tax-limiting Proposition 13. While the lengthy feature included incisive details and offered a handful of interesting ideas, it was one of the most intellectually dishonest investigations I’ve read in a while.

How does one look at California and its woes without mentioning the power of the state’s public employee unions, which control the Legislature and have driven spending on their members’ pay and benefits to unsustainable levels? How do you not focus on Democratic dominance of virtually every level of government?

At least the writers were honest about their premise: “It is tempting to accuse those doing the governing. … But … the main culprit has been direct democracy. … Since 1978, when Proposition 13 lowered property-tax rates, hundreds of initiatives have been approved on subjects from education to the regulation of chicken coops.”

Bogeyman

Prop. 13 is the recurring bogeyman, and the Economist even posits that the state’s public schools are underfunded despite grabbing 40 percent of the general fund budget. The Economist wants the Legislature to have more power and offers a few process-oriented changes, but the piece is noteworthy mainly because it is part of a new wave of anti-Prop. 13 fervor. Expect more of it as the state continues to struggle and as the money keeps running out.

For instance, the Economist rails against Prop. 13’s protections for commercial property owners in addition to residential owners. There’s already a low-level push in the Legislature for a split-rolls property tax that would remove Prop. 13 protections from nonresidential properties.

I’m not a huge fan of direct democracy – where voters enact legislation – which was a Progressive-era innovation that has caused more problems than it solved. But it’s ironic that modern-day Progressives are most vociferous in their attacks on the initiative process. I always get a kick out of those “Repeal Prop. 13” bumper stickers spotted on cars around Sacramento, cars no doubt belonging to public employees desperate for the state to find new sources of cash to pay their millionaire pensions. It’s hard to believe these Progressive critiques of direct democracy come from a sudden interest in civics. They come from frustration that California’s voters, who – despite reliably electing a strong majority of liberal Democrats to most offices – tend to be tight with a dollar.

Direct democracy has been frustrating for liberals. Sure, voters approved the California Coastal Commission and a boondoggle stem-cell research agency and earmark the bulk of the budget to public schools, but, as a colleague points out, the Economist and other critics of direct democracy rarely if ever point to these abuses in the democratic system. They always point to Prop. 13. They still cringe at the populist anti-tax movement that Prop. 13 spawned. They are angry that Prop. 13 remains the third rail of California politics.

Repeal Effects

Have these lefties ever considered what would actually happen if their dreaded Prop. 13 were repealed? Property taxes would soar. Property values would plunge. Commercial property values also would plunge, taking jobs with them at a time when the state struggles with persistently high unemployment. The steady stream of people fleeing to other states would escalate, although a further drop in property values would make it harder for many Californians to leave. Meanwhile, the same state government that overspends its budget in good times and bad, would burn through the new infusion of cash, leaving the same structural budget deficit that we’ve endured for years now.

This idea that Prop. 13 sapped revenue from government is absurd. Richard Rider of the San Diego Tax Fighters offered this data for his county: “In 1977 – the year before Prop. 13 took effect – our countywide property tax revenue was about $639 million. For this past June 30, concluding the 2009-10 fiscal year, our county assessor reports revenue of $4.596 billion. For every property tax dollar collected in 1977, the county this last year collected $7.20. During that time frame, our county population has grown about 85 percent, and inflation has gone up about 260 percent. Hence property tax revenues today are substantially higher than the bloated pre-Prop. 13 year, even after adjusting for inflation and population growth.”

Rider notes that California has the highest or near-highest tax rates in many key categories. The basic premise of the Left is that California suffers from too many limits on the size of its government. If only the good folks in the Legislature – the same people who propose bizarre laws even as the state reaches the brink of insolvency – were given the power to do their job, all would be well.

There are two basic schools of thought on ways to reform our state. There are those who think that the state simply has a revenue problem. We just need to find ways to reduce the roadblocks to such revenue by “reforming” Prop. 13 or reducing the ability of voters to restrict state spending. And then there are those of us who believe that the state must stop spending and regulating itself into oblivion, that the key is reforming government, cutting spending and breaking the power of the unions.

The answer’s pretty obvious, but it continues to elude the deep thinkers at the Economist and elsewhere.

— Steven Greenhut